Traders widely see the August jobs report as one of the most important readings in recent memory as the Federal Reserve crafts its plans to begin paring back its vast bond-buying program.

The Labor Department said the U.S. economy added 169,000 jobs in August, missing economists’ expectations of 180,000. The jobless rate fell to 7.3%, the lowest since December 2008, and less than estimates that it would hold steady at 7.4%.

The labor force participation rate, which gauges the proportion of population in the labor force, fell to 63.2% from 63.4% in July, the lowest since August 1978.

Peter Boockvar, chief market strategist at The Lindsey Group, told clients that "bottom line, the pace of labor gains remain mediocre with the 8 month average being 180k and is just 148k over the past three months."

Meanwhile, Todd Schoenberger, managing partner at LandColt Capital, said the data blurs Wall Street's forecast of when exactly the Fed will begin paring back its bond purchases.

"The uncertainty factor has been ratcheted up a notch as Wall Street received little closure with the ongoing 'Fed taper' argument," he said. "Chairman Bernanke and Co. may have missed their window to taper in the second quarter when the country had better GDP rates and jobs data to work from."

Elsewhere, U.S. crude oil prices climbed 56 cents, or 0.54%, to $108.96 a barrel. Wholesale New York Harbor gasoline rose 0.35% to $2.846 a gallon. In metals, gold fell $3, or 0.22%, to $1,370 a troy ounce.

There was little in the way of corporate news on the day. However, market participants were eyeing what could reportedly be a record bond sale in the near future by Verizon Communications (VZ) to fund its $130 billion buy of the remaining 45% stake in Verizon Wireless from Vodafone (VOD).

Foreign Markets

The Euro Stoxx 50 dipped 0.02% to 2774, the English FTSE 100 fell 0.1% to 6526 and the German DAX fell 0.18% to 8220.

In Asia, the Japanese Nikkei 225 sold off by 1.5% to 13861 and the Chinese Hang Seng rose 0.1% to 22621.